EU regulator spells out licence guidelines to prevent patent wars

BRUSSELS (Reuters) - The European Commission published patent licensing guidelines on Wednesday aimed at avoiding disputes such as those that have ensnared Qualcomm and Apple, while balancing the interests of patent holders and users.

A man looks at the screen of his mobile phone in front of an Apple logo outside its store in Shanghai, China July 30, 2017. REUTERS/Aly Song

With billion of dollars in sales at stake, patent holders such as world No. 1 smartphone chip maker Qualcomm, Ericsson, Nokia and users such as Apple, Volkswagen and Daimler have lobbied the European Union executive in the past year to put forward their views.

The Commission’s guidelines initially favoured patent owners but were then modified to add in elements to support users. The final draft was watered down after regulators decided not to take sides following intense last-minute lobbying, people familiar with the matter said.

“Some people have asked us to take sides. We believe stakeholders should solve the issue themselves. Patent wars do not help anybody,” Commission Vice President Jyrki Katainen told a news conference on Wednesday.

The technology industry depends on thousands of patents that companies frequently cross license to rivals, while reserving their most strategic intellectual property to create proprietary products.

But intense competition sometimes spills over into costly legal battles as seen in a string of patent wars among smartphone makers in recent years.

The guidelines no longer require patent owners to provide licences to all, the people said - a victory for patent holders such as Qualcomm. However, the guidelines do not specifically back the system under which users pay different rates to use patents, as the patent holders had wanted.

However, Qualcomm’s royalty approach, known as use-based or value-based, predominates in the tech industry with royalties based on how much value a technology adds to a product. It is an important source of profits for the company and others which have adopted it.

“The whole debate is still open. On balance, it is a win for Qualcomm and other patent owners,” one expert in patents said.

The guidelines are part of a broader drive by the Commission to set new rules for internet-connected devices for cars, home automation and energy devices beyond computers and smartphones.

The EU’s planned measures include setting up an expert group to look into licensing practices, intellectual property valuation and how to determine fair, reasonable and non-discriminatory royalties, and a project to evaluate which patents are essential to ensure that different devices can work together.